-- Net sales during the third quarter ended September 30, 2018 increased to
RMB86.9 million or US$12.6 million from RMB73.9 million last year.
-- Sales of specialty films were RMB45.3 million (US$6.6 million) or 52.2%
of our total quarterly revenues.
-- Gross profit grew to RMB17.1 million (US$2.5 million) from RMB6.7 million
a year ago; gross margin was 19.6%t compared to 9.1% last year.
-- Net loss attributable to the Company was RMB1.8 million (US$0.3 million)
compared to net loss of RMB12.1 million during the same period in 2017,
representing a decrease in loss of RMB10.3 million.
-- Basic and diluted net loss per share was RMB0.57 or US$0.08.

First Nine Months 2018 Financial Highlights

-- Net sales during the first nine months ended September 30, 2018 increased
to RMB243.4 million or US$35.4 million from RMB211.9 million last year.
-- Sales of specialty films were RMB109.0 million (US$15.9 million) or 44.8%
of total revenues during the period.
-- Gross profit grew to RMB33.3 million (US$4.9 million) from RMB15.5
million a year ago; gross margin was 13.7%t compared to 7.3% last year.
-- Net loss attributable to the Company was RMB18.7 million (US$2.7 million)
compared to net loss of RMB35.9 million during the same period in 2017,
representing a decrease in loss of RMB17.2 million.
-- Basic and diluted net loss per share was RMB5.73 or US$0.83.

Mr. Zengyong Wang, Chairman and CEO of Fuwei Films, commented, "While we continued to be adversely affected by intense competition and increased supply over demand in China's BOPET market, our net sales and the sales of specialty films increased. We are glad to announce that the sales of specialty films accounted for 52.2% of the total revenues for the third quarter of 2018. We believe the improvement of our financial metrics benefits from continued implementation of differentiation strategy. Looking ahead, encouraged by this positive trend, we believe our commitment to innovation and R&D will enable us to capitalize on market opportunities and as a result expect to realize profits despite challenging industry and economic conditions."

Third Quarter 2018 Results

Net sales during the third quarter ended September 30, 2018 were RMB86.9 million (US$12.6 million), compared to RMB73.9 million during the same period in 2017, representing an increase of RMB13.0 million or 17.6%. The increase of average sales price caused an increase of RMB18.6 million and the sales volume decrease caused a decrease of RMB5.6 million.

In the third quarter of 2018, sales of specialty films were RMB45.3 million (US$6.6 million) or 52.2% of our total revenues as compared to RMB28.5 million or 38.6% in the same period of 2017, which was an increase of RMB16.8 million, or 58.9% as compared to the same period in 2017. The increase in average sales price caused an increase of RMB2.9 million and the increase in the sales volume caused an increase of RMB13.9 million.

The following is a breakdown of commodity and specialty film sales (amounts in thousands):

Overseas sales were RMB8.5 million or US$1.2 million, or 9.8% of total revenues, compared with RMB15.2 million or 20.6% of total revenues in the third quarter of 2017. The increase in average sales price caused an increase of RMB2.3 million and the decrease in sales volume resulted in a decrease of RMB9.0 million.

The following is a breakdown of PRC domestic and overseas sales (amounts in thousands):

Our gross profit was RMB17.1 million (US$2.5 million) for the third quarter ended September 30, 2018, representing a gross margin rate of 19.6%, as compared to a gross margin rate of 9.1% for the same period in 2017. Correspondingly, gross margin rate increased by 10.5 percentage point compared to the same period in 2017 mainly due to the increase of average sales price.

Operating expenses for the third quarter ended September 30, 2018 were RMB17.8 million (US$2.6 million), which was RMB1.5 million, or 9.2% higher than the same period in 2017. This increase was mainly due to increased expenses on research and development.

Net loss attributable to the Company during the third quarter ended September 30, 2018 was RMB1.8 million (US$0.3 million) compared to net loss attributable to the Company of RMB12.1 million during the same period in 2017, representing a decrease in loss of RMB10.3 million.

Basic and diluted net loss per share was RMB0.57 (US$0.08) and RMB3.70 for the three-month period ended September 30, 2018 and 2017, respectively.

Total shareholders' equity was RMB200.26 million or US$29.16 million as of September 30, 2018, compared with RMB221.03 million as of December 31, 2017.

As of September 30, 2018, the Company had 3,265,837 basic and diluted total ordinary shares outstanding.

Nine Months 2018 Results

Net sales during the nine-month period ended September 30, 2018 were RMB243.4 million (US$35.4 million), compared to RMB211.9 million, during the same period in 2017, representing an increase of RMB31.5 million or 14.9%. The increase of average sales price caused an increase of RMB35.6 million and the decrease in the sales volume caused a decrease of RMB4.1 million.

In the nine-month period ended September 30, 2018, sales of specialty films were RMB109.0 million (US$15.9 million) or 44.8% of our total revenues as compared to RMB75.8 million or 35.8% in the same period of 2017, which was an increase of RMB33.2 million, or 43.8% as compared to the same period in 2017. The increase of average sales price caused an increase of RMB2.8 million and the increase in the sales volume caused an increase of RMB30.4 million.

The following is a breakdown of commodity and specialty film sales (amounts in thousands):

Overseas sales during the nine months ended September 30, 2018 were RMB36.1 million or US$5.3 million, or 14.8% of total revenues, compared with RMB44.2 million or 20.9% of total revenues in the same period in 2017. This was RMB8.1 million lower than the same period in 2017. The decrease in sales volume resulted in a decrease of RMB12.7 million and the increase of average sales price caused an increase of RMB4.6 million.

The following is a breakdown of PRC domestic and overseas sales (amounts in thousands):

Our gross profit was RMB33.3 million (US$4.9 million) for the first nine months ended September 30, 2018, representing a gross margin of 13.7%, as compared to a gross margin of 7.3% for the same period in 2017. Correspondingly, gross margin increased by 6.4 percentage. Our average product sales prices increased by 17.2% compared to the same period last year while the average cost of goods sold increased by 9.1% compared to the same period last year. Consequently, the amount of increase in sales price was higher than that in cost of goods sold during the nine months ended September 30, 2018 compared with the same period in 2017, which resulted in an increase in our gross profit.

Operating expenses for the nine months ended September 30, 2018 were RMB47.0 million (US$6.8 million), compared to RMB44.3 million in the same period in 2017, which was RMB2.7 million or 6.1% higher than the same period in 2017. This increase is mainly due to increased expenses on research and development.

Conference Call Information

The Company will host a teleconference on Wednesday, November 28, 2018, at 8:00 a.m. ET / 9:00 p.m. Beijing time to discuss the financial results. To participate in the call, please dial +1-877-407-9205 in North America, or +1-201-689-8054 internationally prior to the scheduled start time.

A replay of the call can be accessed via telephone by calling +1-877-481-4010 in North America, or +1-919-882-2331 internationally, and entering the following reply ID: 41237. The replay will be available until December 28, 2018, at 08:00 a.m. ET.

About Fuwei Films

Fuwei Films develops, manufactures and distributes high-quality plastic films using the biaxial oriented stretch technique, also known as BOPET film (biaxially oriented polyethylene terephthalate). Fuwei's BOPET film is widely used to package food, medicine, cosmetics, tobacco, and alcohol, as well as used in the imaging, electronics, and magnetic products industries.

Safe Harbor

This press release contains information that constitutes forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to risks. Risk factors that could contribute to such differences include those matters more fully disclosed in the Company's reports filed with the U.S. Securities and Exchange Commission which, among other things, include both the short and long-term effects of the global financial crisis on the Company and the BOPET film industry; competition in the BOPET film industry; growth of, and risks inherent in, the BOPET film industry in China; uncertainty as to future profitability and our ability to obtain adequate financing for our planned capital expenditure requirements; uncertainty as to our ability to continuously develop new BOPET film products and keep up with changes in BOPET film technology; risks associated with possible defects and errors in our products; uncertainty as to our ability to protect and enforce our intellectual property rights; uncertainty as to our ability to attract and retain qualified executives and personnel; and uncertainty in acquiring raw materials on time and on acceptable terms, particularly in view of the volatility in the prices of petroleum products in recent years. The forward-looking information provided herein represents the Company's estimates as of the date of the press release, and subsequent events and developments may cause the Company's estimates to change. The Company specifically disclaims any obligation to update the forward-looking information in the future. Therefore, this forward-looking information should not be relied upon as representing the Company's estimates of its future financial performance as of any date subsequent to the date of this press release. Actual results of our operations may differ materially from information contained in the forward-looking statements as a result of the risk factors.

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